Recent events have shown us that the destruction of human life from geopolitical events can sometimes render their impact on financial markets trivial in comparison. But we have a responsibility to consider the investment implications, prepare for and monitor them.
We know that geopolitical risks, and the great uncertainty that can stem from them, are one of the biggest financial concerns that keep our clients awake at night. Our latest report Peace of Mind in a Dangerous World is an opportunity to shed what we hope will be some reassuring light on our approach to protecting your investments from these risks.
Last year’s escalation of the Ukraine war to a full-scale invasion was a reminder of how much difference hard-to-foresee geopolitical risks sometimes make to investors. The war was an important reason why even the most sophisticated forecasters grossly underestimated how much inflation would rise, how much equity markets would struggle and how bonds would suffer their worst year in decades.
It’s not possible to monitor every conceivable geopolitical risk. As investors, we pinpoint four ‘Tier 1’ risks: a China-Taiwan crisis; an escalation of the Ukraine conflict; a highly disruptive cyberattack; and direct military confrontation between Israel and Iran. We identify the ‘red flags’ that would suggest that each of these key risks might be imminent and outline how we plan to respond via adjustments to our investment portfolios.
The world has probably become more dangerous over the past few years and the future is unpredictable. But there are things we can do to prepare for the unknown. We hope that having a plan for how we identify, monitor and respond to geopolitical risks will offer you some peace of mind about your investments.
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YOU CAN’T PREDICT, YOU CAN PREPARE
Oliver Jones, head of asset allocation highlights the biggest geopolitical risks, how we can monitor them and our approach as investors.
We know that geopolitical risks, and the great uncertainty that can stem from them, are one of the biggest financial concerns that keep our clients awake at night. We hope that in addition to our webinar, our latest report Peace of Mind in a Dangerous World is an opportunity to shed what will be some reassuring light on our approach to protecting your investments from these risks.
Foreword
In introducing this report we want to both acknowledge that uncertainty is a real and genuine concern for our clients — especially when it comes to things like big geopolitical risks that are far removed and outside of our control — and offer what we hope will provide some genuine peace of mind when it comes to your investments. Sadly, as recent events have shown us, the destruction of human life from geopolitical events can sometimes render the impact on financial markets trivial in comparison. But we still have a responsibility to consider the investment implications, prepare for and monitor them. We know that these risks, and the great uncertainty that can stem from them, are one of the biggest financial concerns that keep our clients awake at night. And this report is an opportunity to shed what we hope will be some reassuring light on our approach to protecting your investments from these risks.
Ed Smith Co-chief investment officer
